Big four secure frequencies in Brazil’s 4G auction, but 450MHz band fails to excite

13 Jun 2012

The Brazilian government has so far raised BRL2.72 billion (USD1.3 billion) from the auction of 4G wireless frequencies, with the nation’s top four cellcos securing rights to offer ultra-high speed mobile services, although no companies submitted specific bids for the 450MHz bandwidth on offer. With the state aiming to use the 450MHz band to promote rural broadband access, the government has reverted to its back-up plan, under which winners of the more lucrative 2.5GHz spectrum will be required to take 450MHz lots as well, and will have to adhere to a rollout timetable to deliver specific coverage to certain rural and remote areas of Brazil. Specifically, 30% of rural areas will have to be covered by June 2014, 60% by December 2014 and 100% by December 2015. The national regulator Anatel classifies a rural area as being one that is at least 30km from any municipality.

Early indications suggest that Telefonica Brazil (Vivo), a unit of Telefonica of Spain, was the largest bidder, offering a total of BRL1.05 billion (equivalent to 67% premium on the state’s reserve price) for 20MHz of national spectrum, while America Movil’s Claro unit bid BRL844.5 million for a similar 20MHz allocation. As well as its licence for 2.5GHz spectrum, it is understood Claro will have to deploy 450MHz band services in rural areas of all states in the north region, plus in rural parts of Bahia and Maranhao states, as well as in greater Sao Paulo with area codes ‘11’ and ‘12’. For its part, as well as its nationwide 2.5GHz spectrum ambitions Vivo will be required to provide rural internet coverage to Sao Paulo, Minas Gerais, Piaui, Ceara, Rio Grande do Norte, Paraiba, Pernambuco, Sergipe and Alagoas.

TIM Brasil meanwhile, backed by Milan-based Telecom Italia, offered BRL375 million for a 10MHz block of nationwide spectrum and for regional licences covering rural parts of Parana, Santa Catarina, Rio de Janeiro and Espirito Santo. Finally, Brazil owned Oi SA will pay BRL345 million for its 10MHz block, which also includes regional licences in Rio Grande do Sul, Mato Grosso do Sul, Mato Grosso, Goias and the Federal District.

The established Brazilian heavyweights will also face fresh competition in some regional markets from pay-TV service providers Sunrise Telecomunicacoes and Sky Brasil Servicos. The former, which was recently acquired by the billionaire entrepreneur George Soros, currently provides pay-TV services in parts of Sao Paulo state. Sunrise Telecomunicacoes bid BRL19.1 million for rights to offer 4G wireless services in its franchise area, while Sky Brasil, a subsidiary of California-based DirecTV (DTV), purchased regional spectrum covering Sao Paulo and Rio de Janeiro; it offered BRL90.6 million for its blocks of frequencies. The two pay-TV providers have acquired spectrum suitable for fixed-wireless broadband services (i.e. at a specific location) rather than for full-mobility usage.

The winners of the 4G wireless spectrum will be required to launch services in the six Brazilian cities hosting soccer’s Confederations Cup by April 2013, and in the twelve host cities for the 2014 Football World Cup by the end of 2013, and all state capitals and cities with more than 500,000 inhabitants by December 2014. Brazil targets all municipalities with at least 10,000 inhabitants to have Long Term Evolution (LTE) service by 31 December 2016.